Tax Credits News

HMRC Standard Letters

We have started to see a standard letter issued to clients in the tax credits system advising them that their claims will end from April 2012 unless contact is made with the tax credit office. These letters have been issued because the tax credit office expect your clients income to be at a level where tax credits may not be applicable for 2012/13. The letter sets out a number of options for your clients to consider, one of which is that they must contact the tax credits office by 31 March 2012 if they want their claim to continue into 2012/13.

Each practice will no doubt have a different approach to this, but our advice would be for clients/you to contact the tax credit office and tell them that your clients want to stay in the system for 2012/13 even though they may not be entitled to tax credits. The two main reasons for this are as follows:

We cannot predict what our clients income will be in 2012/13 and therefore it maybe better that they stay in the system just in case their income falls or you decide to undertake some tax credits planning which may increase the clients award. Remember from 6 April 2012 the backdating provisions are changing so that if your clients are removed from the system but later reapply because it becomes apparent they are entitled to tax credits, the award can only be backdated for one month.

Even if your clients income is increasing or at a level where there will be no entitlement to tax credits 2012/13, your clients may have been overpaid tax credits from an earlier year that have just been carried forward. If your clients are removed from the system, this will trigger a demand for repayment of those tax credits which your clients may not be expecting at this time. It is better to talk to you clients now about this and advise them that these overpayments will only be collected when they are removed from the system from 1 April 2013. It may also give you an opportunity to look at some planning possibilities in the 2012/13 tax year to try and mitigate the overpayments.

Please feel free to call us to discuss the above or any other concerns you may have with tax credits going into the 2012/13 tax year.

Software Update - April 2012

Our unparalleled Tax Credits software has been updated to incorporate 2012/2013 rates and recent changes in legislation. Version 5 went live in April and confirms our position as the provider of the most comprehensive software of this kind on the market.

Our service includes ready-to-use systems plus full training and support. Click on the “Summary of services” link on this page for more detailed information.

You don’t need any detailed knowledge of Tax Credits as the software guides you through every step, so even junior team members can use it. It comes complete with a marketing system, a full suite of letters for clients and HMRC and is regularly updated to reflect changes in legislation.

HMRC Update

After many years of ambiguity, the Tax Credits Team have received a response from HMRC Department for Benefits and Credits, Customer Strategy, Policy and Change. This confirms that the legislation as it stands is interpreted by the Tax Credits Office to be that the National Minimum wage does not apply to company directors unless they have contracts which make them workers as defined in section 54(3) of the National Minimum Wage act 1998; or that for Working Tax Credit purposes, directors as office holders do not have to be engaged under a contract of service.

The major question asked by all tax professionals dealing with Tax Credits has been answered and the way is now clear to ensure that all tax payers pay the correct amount of tax and receive the awards they are entitled to.

To find out more about the Tax Credits Team and how they can support your practice in planning and compliance with Tax Credits please contact info@taxcreditsteam.co.uk or call